Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Regions Financial in Focus
Based in Birmingham, Regions Financial (RF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 10.99%. Currently paying a dividend of $0.16 per share, the company has a dividend yield of 4.18%. In comparison, the Banks - Southeast industry's yield is 1.9%, while the S&P 500's yield is 1.92%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.62 is up 34.8% from last year. In the past five-year period, Regions Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 25.80%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Regions Financial's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
RF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.54 per share, with earnings expected to increase 13.24% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, RF is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).